Concerns

The Upper Tribunal Tax (UTT) decided in a case between HM Revenue and Customs (HMRC) and Bolt Services UK Limited (Bolt), a member of the Estonian Bolt group, a global mobility platform offering a range of services, including transport by private hire vehicle, also known as PHV.

The UTT's decision was made in favour of Bolt. More importantly, it can potentially have significant VAT implications for other ride-hailing companies operating under a similar business model, such as Lyft, Gett, and Uber, which could be eligible to receive a payback of overpaid VAT from HMRC.

Facts of the Case and Ruling Implications

The main point of dispute between HMRC and Bolt is the VAT treatment of Bolt's ride-hailing services, specifically whether they qualify under the Tour Operators Margin Scheme (TOMS). Bolt argued that those services fall under the scope of TOMS, thereby allowing it to pay VAT only on the margin between the ride cost charged to passengers and the amount paid to drivers. 

HMRC opposed that, arguing that Bolts' services do not qualify for TOMS. Consequently, they considered that Bolt should pay VAT on the full amount paid for the ride.

The First-tier Tribunal (FTT) ruled in favour of Bolt, determining that its services are similar to those provided by tour operators or travel agents. Moreover, it underlined that Bolt supplied the drivers' services without material alteration or further processing. Additionally, the FTT stated that Bolt acted as a principal in providing the ride-hailing services and was liable to pay VAT only on its margins, as permitted under the TOMS.

The HMRC appealed against the FTT's decision to the UTT, claiming that the FTT had not correctly classified Bolts' services and that the TOMS scheme was not applicable. However, the UTT upheld the FTT's decision and ultimately dismissed the HMRC's appeal on all grounds. Therefore, it confirmed that Bolt's VAT treatment under TOMS was appropriate.

Conclusion

Following the UTT's ruling, other ride-hailing companies may have the opportunity to apply the same VAT treatment, as provided under the TOMS scheme. On the one hand, this may represent substantial VAT savings, as companies will be liable to pay VAT only on their margins rather than on full ride amounts. 

However, for HMRC, this decision means that they will have to repay hundreds of millions of pounds in overpaid VAT to ride-hailing companies. Nevertheless, it remains to be seen whether the HMRC will take the case to the Court of Appeal.

Source: The Commissioners for HM Revenue and Customs v Bolt Services UK Limited, Bloomberg